Roberta Avery – Yourhome​.ca

Unless you are plan­ning to make it your per­ma­nent home, pur­chas­ing a new ski chalet, a new week­end condo, or a new cot­tage will get a lot more expen­sive when the har­mo­nized sales tax comes into effect July 1. The tax will add tens of thou­sands of dol­lars to the cost of a new sec­ond home.

Last sum­mer, after vig­or­ous lob­by­ing from devel­op­ers, the Build­ing Indus­try and Land Devel­op­ment Asso­ci­a­tion (BILD), and the Ontario Home Builders’ Asso­ci­a­tion, the province back­tracked on charg­ing the HST on the full cost of a new home priced at more than $400,000 by intro­duc­ing a hous­ing rebate of up to $24,000. The catch is that to qual­ify for the rebate, the home has to be a pri­mary residence.

“If it’s a new ski chalet, it will be sub­ject to HST with no rebate,” says Scott Blod­gett of the Min­istry of Finance.

The same goes for a new cot­tage on a Muskoka lake, a new con­do­minium at devel­op­ments such as the Vil­lage at Blue Moun­tain or Red Leaves in Muskoka, a new home in a golf­ing com­mu­nity or any new home in Ontario, if it’s not going to be a pri­mary residence.

“There’s no doubt that it’s a blow for the indus­try,” says Frank Gian­none, pres­i­dent of FRAM, the com­pany devel­op­ing the Ship­yards Har­bour Res­i­dences in Colling­wood. “It’s going to have a sig­nif­i­cant effect on the second-home market.”

It’s long been a tra­di­tion in the four-season recre­ational area around Colling­wood for peo­ple to buy a home to use first as a week­end place with plans to move in full­time when they retire.

“The inten­tion to use the res­i­dence as a pri­mary place of res­i­dence upon some more dis­tant occa­sion such as retire­ment does not qual­ify that res­i­dence as the pri­mary place of res­i­dence,” states a mem­o­ran­dum sup­plied by Blodgett.

Gian­none says the HST amounts to a “lux­ury tax” on new sec­ond homes. “It’s going to have a big impact out­side the GTA,” he says.

The province’s rebate sys­tem fol­lows a for­mula using input tax cred­its, and the net result is that the HST will add $6,000 more in tax to a $500,000 new home, condo, cot­tage or ski chalet pur­chased as a pri­mary res­i­dence, and $30,000 more tax to the same new home pur­chased as a sec­ond home. Higher priced new homes will be sub­ject to even more tax.

Resale homes won’t be sub­ject to the HST even if they are to be used as sec­ond homes. But Andres Paara, the pres­i­dent of the Geor­gian Tri­an­gle Real Estate Board, which includes Colling­wood and the Blue Moun­tains, says there will also be an impact to the resale mar­ket as it will add, on aver­age, about $1,500 to the cost of buy­ing a home as GST will be added to real estate com­mis­sions and home energy audits, as well as legal fees and appraisals.

At the Orchard, a 130-home devel­op­ment of semi-detached and town­homes at the base of the pri­vate Craigleith Ski Club and within walk­ing dis­tance of Blue Moun­tain, the major­ity of pur­chasers are “week­enders,” although some plan to live there per­ma­nently in the future, says sales man­ager Jen­nifer Wootton.

By last fall, news of the impact of the HST on second-home buy­ers was begin­ning to sink in, says Woot­ton. “It spurred a lot of sales activ­ity,” she says.

Most of the remain­ing inven­tory was snapped up by skiers as soon as the first snow began to fall.

“Our sales have been very active since Octo­ber,” says Wootton.

Many pur­chasers at the Ship­yards down­sized to a con­do­minium and work part-time in the city, while liv­ing full­time at the Shipyards.

“Deter­min­ing which is the pri­mary res­i­dence is a fine line, but it’s up to the cus­tomer to make the deci­sion,” says Giannone.

Thanks to a grand­fa­ther clause that exempts home­buy­ers from pay­ing the provin­cial por­tion of the sin­gle sales tax if they entered into a writ­ten agree­ment of pur­chase and sale on or before June 18, 2009, Ship­yards pur­chasers Anne Lockie and Fred Pro­moli will avoid hav­ing to pay tens of thou­sands of dol­lars in HST on their new home, although their $1-million plus home won’t be fin­ished until the fall.

“All I can say about the har­mo­nized sales tax is that there has been very lit­tle infor­ma­tion about the impact to new home­buy­ers and I sus­pect many are going to get a sur­prise,” says Lockie, who is exec­u­tive vice pres­i­dent with the Royal Bank of Canada and pres­i­dent and CEO of Royal Mutual Funds Inc.

“It could make for some ugly clos­ing dis­cus­sions,” she says.

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Con­tact the Jef­frey Team for more infor­ma­tion  -  416−388−1960

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